Trading Psychology

What is the financial market? Isn’t it a crowd or lots of people selling or
buying all the time? Many people just want to make a profit in the market.
All price changes are evoked by changes of sellers’ and buyers’ opinion
about the good and ideal price for trading at the current moment and in the
ongoing conditions. Understanding this fact opens a lot of opportunities for
a professional trader because the crowd psychology is very simple and
one-dimensional. Studying the crowd sentiments and being out let you catch
the moment of changing the tendency in the market and start or stop trading
successfully. If the trader follows the crowd, is a part or stands against
it his capital can easily become just memories.

Technical analysis is the method helping to determine the crowd sentiment
and its direction. The chart history and statistics show the changes of the
traders’ sentiment during the whole trading period for every instrument.
Mathematics and formulas will not be much important here but the trends and
different price patterns will help us to understand a situation in the
market.

At the same time you should not forget about the individual trader in the
market whose psychological state is often more important – about yourself.
In many situations our mood affects trading result and determines if we earn
or sink with the other unlucky traders. The trading situation usually
changes very quickly and incalculably creating hard terms for work, baring
our problems with the character and behavior and discovering all our
personal imperfections. It often happens because the market is a jungle full
of dangerous varmints who are ready to attack a careless player. All
participants of the market are ready to use any chances to make a profit and
they will notice and use all our mistakes and miscounts.

But we are not banks or funds. We are just online traders and the evil men
and women from the large market will not threaten us as we are not important
for them and have no influence on a trading situation. Only our weaknesses
and psychological aspects can threaten us. The trading psychology helps us
to study not only basic motivators of the crowd in the financial markets but
gives an opportunity to understand ourselves and discover our weaknesses
separating us from millions in profit. The methods of analysis are surely
important and give us a perfect instrument but it becomes useless because of
our weaknesses. The trader having the best strategy and losing his head over
the unprofitable deals reminds a drunk driver of the luxury car on the
mountain spiral road. As you can guess the crash for both is unavoidable.
Our psychological qualities do not allow us to use successful trading
methods at the beginning of trading career and work out our own strategies
in future.

Trading in the financial market is not only the chart analysis and price
forecasting because you spend more efforts to work with yourself. If the
trader works at his mistakes and understands his own weaknesses he can
achieve a great and stable success. Understanding the psychological aspects
of trading will drive a new trader to success.